Servicemembers' Civil Relief Act Provides Active Duty Military Protection Against Foreclosure

The Beacon News recently ran a story about the Federal law known as the Servicemembers' Civil Relief Act, whereby troops on active duty are granted various legal protections, including a shield against foreclosure in some cases. The protections in this law are available to troops from all over the country.

In Illinois, families of local reservists or Illinois National Guard members may also apply for grants to help pay their bills with the Illinois Military Family Relief Fund. Information about the fund is available by calling (866) 524-4564. For more information about assistance available to military families in Illinois, people may visit Operation Home Front.

For more, see Law offers protection to military families.

For a prior post on one servicemember suing his mortgage lender for an alleged illegal foreclosure of his home while on active duty, see Michigan Servicemember Loses Home To Illegal Foreclosure, Says Lawsuit.

Go here for other posts on the Servicemembers Civil Relief Act.

Servicemembers' Civil Relief Act Gives Protection To Financially Strapped Members Of U.S. Military

The Navy Compass reports:

• "Are creditors trying to repossess a service member's car? Are creditors attempting to foreclose on a home? If so, the Servicemembers' Civil Relief Act (SCRA) could help give a member some valuable time by halting proceedings and affording them an opportunity to work out new payment plans with their creditors."

For more on this legal protection available for members of the U.S. military, see The SCRA and protection from creditors.

Go here for other posts on Servicemembers' Civil Relief Act.

U.S. Army Dentist's Suit Accuses BofA Of Violating Sevicemember's Rights When Foreclosing On Her Home While On Active Duty

In Los Angeles, California, KNBC-TV Channel 4 reports:

• For two years, U.S. Army reservist Diana Zschaschel has been fighting foreclosure against the West Los Angeles condo she shared with her husband, citing the Servicemembers Civil Relief Act, which protects active military personnel from financial hardship while on duty.
  
  Zschaschel and husband Paul Garcia have filed a lawsuit against Bank of America, which claims was exempt from abiding by the Servicemembers Civil Relief Act because Zschaschel wasn’t eligible for the protection at the time.

***

• The Servicemembers Civil Relief Act protects active military personnel from financial hardship while on duty and specifically denies banks the ability to foreclose on a property during that time.
  
  Zschaschel said she's willing "to embarrass myself and expose my personal situation to help other people going through the same thing. Because it sucks."
  
  In a statement to NBC4, Bank of America said it checked Zschaschel’s status with the Department of Defense. Because she was in her two-week training, the bank said, the U.S. Army dentist was not considered active military and therefore she did not qualify for the benefits.
  
  An NBC4 investigation into the code found that "active duty" does include training, a point now under scrutiny in the lawsuit filed by Zschaschel against the bank.

For more, see Citing Federal Protection, Army Dentist Fights Foreclosure (U.S. Army reservist Diana Zschaschel has filed suit against Bank of America, which claims she was not eligible for federal protection while a foreclosure went through).

Feds Shake $200K Lawsuit Settlement Out Of Southern California Landlord Accused Of Filing False Affidavits Regarding Active Duty Status Of Servicemember/Tenants In Eviction Actions

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department announced [] that Lincoln Military Housing, which owns and operates dozens of on-base and off-base military housing communities throughout Southern California, has agreed to pay $200,000 to resolve allegations that it unlawfully evicted active-duty servicemembers and their families by obtaining default judgments against them, in violation of the Servicemembers Civil Relief Act (SCRA). This is the first case that the Justice Department has filed alleging the unlawful eviction of servicemembers from their homes.
  
  The SCRA provides servicemembers with protections against certain transactions that could adversely affect their civil legal rights while they are in military service. Under the SCRA, if a tenant who is on active duty is sued for eviction and does not make an appearance in the case for any reason, the landlord must file an affidavit with the court stating whether the tenant is in military service, showing necessary facts to support the affidavit. To evict a tenant in California, a landlord must first obtain a court order. The complaint alleges that Lincoln Military Housing requested default judgments against servicemembers without filing the affidavits required by the SCRA to alert the court of the tenants’ military status. As a result, servicemembers were put at risk of being evicted without having an opportunity to participate in the case and without having an attorney assigned to represent them.
  
  Despite the fact that the servicemembers who are receiving compensation under the settlement were all in military service at the time of their evictions, Lincoln Military Housing filed affidavits stating that no defendants were in military service.
  
  Under the consent order, which is still subject to approval by U.S. District Court for the Southern District of California, Lincoln Military Housing must pay each aggrieved servicemember $35,000, vacate the eviction judgment, forgive any deficiency balance and ask the credit bureaus to remove the evictions from their credit reports. In addition to compensating the servicemembers, Lincoln Military Housing must pay a civil penalty of $60,000 to the United States.
  
  ***
  The settlement also requires Lincoln Military Housing to make systemic changes to its business practices, including providing SCRA training to its employees and developing new policies and procedures consistent with the SCRA. The policies and procedures will require Lincoln Military Housing and its agents to review the Department of Defense Manpower Data Center (DMDC) database and file a proper affidavit of military service before seeking a default judgment against a tenant in an eviction action.
  
  Servicemembers and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php. Additional information on the department’s enforcement of the SCRA and other laws protecting servicemembers is available at www.servicemembers.gov.
  
  This matter resulted from a referral to the Justice Department by the Legal Services Support Team at Marine Corps Air Station Miramar.

Source: Lincoln Military Housing Agrees to Pay $200,000 to Settle Servicemembers Civil Relief Act Violations (Case Marks First Time the Justice Department has Filed Suit Alleging Unlawful Eviction of Active-Duty Servicemembers).

Active Duty Texan Returns Home To Find $300,000, Free & Clear Residence Sold Out From Under Him By HOA Over $800 Unpaid Fee

In Frisco, Texas, Mother Jones reports:

• Michael Clauer is a captain in the Army Reserve who commanded over 100 soldiers in Iraq. But while he was fighting for his country, a different kind of battle was brewing on the home front. Last September, Michael returned to Frisco, Texas, to find that his homeowners' association had foreclosed on his $300,000 house—and sold it for $3,500. This story illustrates the type of legal quagmire that can get out of hand while soldiers are serving abroad and their families are dealing with the stress of their deployment. And fixing the mess isn't easy.

***

• In Texas, homeowners' associations can foreclose on homes without a court order, no matter the size of the debt. In May 2008, the HOA sold the Clauers' home for a pittance—$3,500—although its appraisal value was $300,000, according to court documents. The buyer then resold the house to a third person. [...] In August 2009, the new owner sent the couple an eviction notice, according to court records filed in the case.

***

• There are a bevy of laws that are supposed to protect servicemembers from losing their homes or jobs while they're on active duty, including the Servicemembers Civil Relief Act (SCRA). The homeowners' association's lawyer filed an affidavit wrongly claiming that neither of the Clauers was on active duty, says Barbara Hale, the couple's lawyer. Hale is seeking to have the court reverse the foreclosure and declare it "null and void," she says.(1)

• In the meantime, the Clauers have obtained an agreement allowing the family to stay in the home, Hale says. She's "confident that the courts will sort this out and do the right thing," but notes that the drawn-out legal process must be stressful for the Clauers. [...] "It's ridiculous how much this is costing us," he says. "I'll be taking out a mortgage on my house that was free and clear just to try to get my house back."

For more, see Soldier in Iraq Loses Home Over $800 Debt (Capt. Michael Clauer's homeowners' association foreclosed on his family's $300,000 house and sold it for $3,500).

See also, WFAA-TV: Back from Iraq, Frisco soldier finds home sold by HOA.

(1) One legal issue that this case could turn on is whether the false affidavit reportedly filed by the foreclosure attorney claiming that neither of the Clauers was on active duty is absolutely void (ie. void ab initio), or whether it is merely voidable.

If found to be absolutely void, an argument can be made that the foreclosure sale, which was based on the void afidavit, is also absolutely void, meaning that the foreclosure sale and the subsequent sale of the property to a third party could conceivably be wiped out.

If the false affidavit is found to be merely voidable, however, the foreclosure sale and subsequent sale to the 3rd party purchaser will also be considered voidable (as opposed to absolutely void). In that event, successfully wiping out these interests could turn on whether the foreclosure purchaser and subsequent purchaser are entitled to the protection of the recording statutes as bona fide purchasers. Since it appears that neither Captain Clauer nor his wife relinquished possession of the home throughout the process, and Mrs. Clauer remained in continuous physical possession thereof, this possession could arguably create, under Texas law, a legal duty on the purchasers to ascertain the rights of the third-party possessor. If a court finds that such an inquiry would have lead to the discovery of the fact that Captain Clauer was on active military duty during the relevant period, the purchasers could be found to be on constructive notice that the foreclosure sale may have been conducted in violation of the Servicemembers Civil Relief Act, which generally prohibits a foreclosure sale of a servicemember's home while on active duty. See Madison v. Gordon, 39 S.W.3d 604; 2001 Tex. LEXIS 5; 44 Tex. Sup. J. 410, (Tex. 2001):

• One purchasing land may be charged with constructive notice of an occupant's claims. This implied-notice doctrine applies if a court determines that the purchaser has a duty to ascertain the rights of a third-party possessor. See Collum v. Sanger Bros., 98 Tex. 162, 82 S.W. 459, 460 (Tex. 1904); American Surety Co., 82 S.W.2d at 183. When this duty arises, the purchaser is charged with notice of all the occupant's claims the purchaser might have reasonably discovered on proper inquiry. Dixon v. Cargill, 104 S.W.2d 101, 102 (Tex. Civ. App.--Eastland 1937, writ ref'd); see also Flack, 226 S.W.2d at 632. The duty arises, however, only if the possession is visible, open, exclusive, and unequivocal. See Strong v. Strong, 128 Tex. 470, 98 S.W.2d 346, 350 (Tex. 1936).

See footnote 2 in this post for more on the effect of possession by one other than the seller on imputing constructive notice on a purchaser of real estate under Texas law. For other states, see Bona Fide Purchaser Doctrine, Possession Of Property By Occupants Other Than The Vendor & The Duty To Inquire.

Among other legal issues that could impact on the Clauers' ability to get back their home are:

1. Was there a violation of the Federal Servicemembers Civil Relief Act in carrying out the foreclosure sale and, if so, does said violation make the foreclosure sale and any subsequent conveyances absolutely void, or merely voidable?
2. Was the foreclosure sale price so low (home with equity of $300K sold for $3,500) so as to "shock the conscience," and, if so, does this fact make the foreclosure sale and any subsequent conveyances absolutely void, or merely voidable? (In this regard, there is a general rule in the foreclosure law of some states that says that where the price realized at a foreclosure sale is so inadequate as to shock the conscience, it may itself raise a presumption of fraud, trickery, unfairness, exploitation, overreaching, or culpable mismanagement, and therefore be sufficient ground for setting the sale aside. See, for example, Berry v. Deutsche Bank National Trust Company, No. 2080840 (Ala. Civ. App., May 14, 2010)).
3. In this story, there is only a brief mention that a certified letter was mailed. No mention on whether the homeowners actually received it and, if not, what other steps the HOA took to notify them. The issue here would be whether the notice of the foreclosure action given to the homeowners was "notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections." Jones v. Flowers, 547 U.S. 220, 126 S. Ct. 1708 (2006) (quoting Mullane v. Central Hanover Bank & Trust Co., 339 U. S. 306, 314 (1950) "An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is notice reasonably calculated, under all the circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. [citations omitted].")
   
   If the notice of sale is found by a court to be absolutely void, the foreclosure sale likewise would be found void. (Go here for the links to the transcript of the oral argument, and the various briefs filed in Jones v. Flowers, referenced above, filed by the Public Citizen Litigation Group attorneys who successfully represented, in the U.S. Supreme Court, a homeowner in connection with the lousy method used to give notice of a pending action that led to the loss of his home in a tax sale.)

Landlord, Feds Settle Suit Alleging Violation Of Servicemembers' Right To Terminate Lease Under SCRA

From the U.S. Department of Justice:

• The Justice Department [...] announced that it had reached a settlement with a Virginia landlord to resolve allegations that she violated the Servicemembers Civil Relief Act (SCRA). The lawsuit alleged that the landlord failed to return prepaid rent and security deposits to a tenant who had terminated her lease early in order to comply with military orders to relocate to Georgia.(1) [...] The complaint, which was filed with the settlement, represents the first lawsuit involving a landlord-tenant matter brought by the Justice Department under the SCRA.(2) Under the terms of the settlement, which must be approved in federal court in Virginia, the landlord must pay her former tenant a total of $5,600 in damages and is enjoined from engaging in future violations of the SCRA.

***

• The tenant in this lawsuit, Colonel Debra Bean, is a highly decorated member of the armed forces. Colonel Bean currently serves as Vice Commander for the 78th Air Base Wing at Robins Air Force Base in Georgia.(3)

For the entire press release, see Justice Department Announces Settlement of Its First Landlord-Tenant Case Under the Servicemembers Civil Relief Act.

(1) The SCRA provides certain protections to active duty servicemembers who must terminate residential leases to comply with military orders for a permanent change of station or for deployment.

(2) According to their press release, the Justice Department’s investigation of this matter originated with a referral to the Civil Rights Division from the U.S. Air Force. The Civil Rights Division received enforcement authority under the SCRA in 2006, and has since reviewed numerous allegations of SCRA violations and resolved investigations in the following areas without the need for litigation:

• the charging of excess interest over the six percent interest rate cap;
• the repossession of vehicles without court orders; and
• the foreclosure on home mortgage loans without court orders.

Servicemembers and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office. Office locations may be found at http://legalassistance.law.af.mil/content/locator.php. Additional information on the Justice Department’s enforcement of the SCRA and other laws protecting servicemembers is available at www.servicemembers.gov.

(3) The landlord obviously picked the wrong person to mess with.

Active Servicemembers Entitled To Waiver Of Prepayment Penalty On Home Mortgages In Some Cases As DOJ Completes Homecomings Probe

From the Civil Rights Division of U.S. Department of Justice:

• The Justice Department [Monday] announced the resolution of its investigation of Homecomings Financial, LLC (Homecomings), under the Servicemembers Civil Relief Act (SCRA). The SCRA suspends or modifies certain civil obligations of individuals serving on active duty in the military.(1)

***

• Homecomings and GMAC Mortgage, LLC now will waive prepayment penalties upon request on residential mortgage loans obtained by active duty servicemembers who receive permanent change of station orders to bases 30 miles or more from their current residences.(2)

For the DOJ press release, see The Justice Department Resolves Investigation Under Servicemembers Civil Relief Act of Homecomings Financial, LLC.

(1) According to the DOJ press release, the Civil Rights Division has reviewed numerous allegations of SCRA violations (ie. foreclosure on home mortgage loans without court orders, waivers of prepayment penalties on home mortgage loans, termination of residential lease agreements), has brought one suit under SCRA, and has resolved a number of allegations without the need for litigation. Servicemembers and their dependents who believe that their SCRA rights have been violated should contact the nearest Armed Forces Legal Assistance Program office. Please consult the military legal assistance office locator at http://legalassistance.law.af.mil and click on the Legal Services Locator.

(2) According to the press release, this modified policy applies to all loans on owner-occupied properties serviced by Homecomings or GMAC Mortgage, LLC with respect to which one of the following entities retains the contractual right to receive the prepayment penalty: Homecomings or GMAC Mortgage, LLC or either entity's affiliates, including, but not limited to, the Residential Funding Company, LLC and GMAC Bank.

Lenders Begin Reviewing Foreclosure Procedures Involving Active Duty Servicemembers After Major JP Morgan Chase Screw-Up In Violating SCRA

The Wall Street Journal reports:

• Some of the nation's biggest lenders are double-checking that their home-lending operations haven't broken a law meant to shield military personnel in active service from foreclosure. So far, the lenders say they haven't uncovered any problems like those J.P. Morgan Chase & Co. acknowledged last week.

• But after Chase found it overcharged more than 4,000 active-duty service members and took the homes of 14, in possible violation of the act that caps interest rates and stops foreclosure, lenders say they are making sure they are in compliance. They are also making sure members of the military know to alert them of their status.

***

• At issue is the Servicemembers Civil Relief Act, which says loans for active-duty service members can't exceed a 6% annualized interest rate. The law also halts all foreclosure proceedings up until nine months after the service member returns from active duty. The law defines active duty as "full-time" service, including tours and training, and says those who knowingly break the act face prison and fines.

• The issue began to surface when a U.S. Marine Corps captain filed a civil lawsuit in federal court in South Carolina last year, alleging he was overcharged by Chase, and seeking punitive damages.(1) Last week, Chase said it discovered its problems in its own review and is mailing about $2 million to victims; it said it had already moved to correct the foreclosures.

***

• Richard Harpootlian, the lawyer for South Carolina Marine Capt. Jonathan Rowles, said more potential victims from all over the country, including some who aren't customers of Chase, have contacted him since last week. The suit is seeking class-action status.

For more, see Lenders Step Up Reviews of Military Foreclosure Practices (requires paid subscription; if no subscription, GO HERE, then click appropriate link for the story).

Go here for more on the rights under the Servicemembers Civil Relief Act.

(1) See Marine shows willingness to fight for what's right.

Congress Mulling Changes In Servicemembers' Civil Relief Act ("SCRA")

Stars and Stripes reports:

• "The SCRA gives broad financial and legal protections to active-duty troops and their families. The legislation was originally written in 1940 but revised in 2003 to put greater emphasis on Guardsmen and reservists who found themselves serving in overseas operations. ... Lawmakers are considering more than a dozen changes to the bill, covering issues such as preventing child custody changes while troops are deployed and allowing troops to suspend their cell phone accounts while they’re overseas."

One change being considered is to impose a delay on a foreclosure of a servicemember’s home until at minimum one year after they return from combat, much longer than the current 90-day wait under the act. For more, see Congress eyes changes to troop protection act (Legal, financial rights of deployed servicemembers being reviewed).

Go here for other posts on the Servicemembers' Civil Relief Act. For financial assistance for Pennsylvania families of deployed servicemembers, see Center gets additional funding to help military families.

NY AG To Fort Drum-Area Landlord: Stop Squeezing Servicemembers Out Of Early Termination Lease Cancellation Fees, Undisclosed Non-Refundable 'Reservation Deposits' In Violation Of Federal, State Law

From the Office of the New York Attorney General:

• Attorney General Eric T. Schneiderman [] announced that his office has issued a cease and desist letter to LeRay 300, LLC, a Virginia-based company owned by Jeffrey S. Lewis, also of Virginia. The business operates as a rental property company near Fort Drum under the name of Woodcliff Community.
  
  The letter orders Woodcliff Community to immediately cease charging service members illegal fees in violation of the Servicemember Civil Relief Act and collecting undisclosed, non-refundable "reservation deposits" in violation of New York State law, among other allegations. The rental property, located in Calcium, New York, is approximately one mile from the main gate at Fort Drum and advertises itself as the "finest neighborhood serving the Fort Drum community."
  
  "Protecting New Yorkers from unscrupulous landlords concerned only with their bottom line, particularly when the tenants are the brave men and women of our nation's military, is a top priority for my office," said Attorney General Schneiderman. "My office will continue to stand with tenants across New York State to ensure landlords follow the law.”
  
  The Servicemember Civil Relief Act is a vital federal law that provides rights and protections to active duty and recently separated members of the military and their families in order to ensure they are able to devote their time and energy to their military duties. Among the protections provided is the ability to terminate a residential lease without penalty prior to the end of the lease term under certain circumstances, including deployment or a permanent change of station. Attorney General Schneiderman's ongoing investigation has resulted in allegations that Woodcliff Community frequently assesses various move-out penalties when soldiers assert their right to terminate their lease early pursuant to the Servicemember Civil Relief Act.
  
  Consumers who have unresolved complaints with LeRay 300, LLC, Woodcliff Community or any other business are urged to contact Attorney General Schneiderman's Regional Office in Watertown at 315-523-6080.

Source: A.G. Schneiderman Announces Cease And Desist Letter Sent To Property Management Company For Allegedly Charging Service Members Illegal Fees (Operating Near Fort Drum, Company Accused Of Charging Fees In Violation Of Servicemember Civil Relief Act).

State AG Invokes NYS Martin Act To Acquire Jurisdiction In Probe Into Violations Of Federal Servicemembers Civil Relief Act In Home Foreclosures

In New York City, Financial Times reports:

• Eric Schneiderman, New York attorney-general, has launched an investigation into possibly unlawful foreclosures on the mortgages of active-duty members of the US military.



• Data released last week by a federal banking regulator suggested that 10 leading lenders may have seized the homes of about 5,000 service members in violation of the Servicemembers Civil Relief Act. The nearly-decade old law restricts foreclosures on the homes of members of the US armed forces while they are on active duty.



• Mr Schneiderman’s probe is part of a larger investigation into banks’ mortgage practices, a person familiar with the matter said. Armed with the Martin Act, a powerful state law that gives prosecutors broad powers to investigate fraud, New York state’s top lawyer has contacted about a dozen banks and insurers as part of an investigation into the securitisation and marketing of mortgage securities, according to people familiar with the matter. A spokesman for Mr Schneiderman declined to comment.

For more, see New York probes military foreclosures.

Justice Department Scores Win Against Rogue Towing Outfit For Repossessing, Selling 20+ Vehicles Belonging To Servicemembers Without Court Orders

In Norfolk, Virginia, Air Force Times reports:

• The Justice Department has scored a victory for service members against a Norfolk, Va., towing company that sold off more than 20 service members’ cars without court orders in recent years. The civil case is not over; it will go to trial next year to determine damages owed to the service members whose vehicles were towed by B.C. Enterprises Inc., doing business as Aristocrat Towing.

• But the decision clarifies protections for troops under the Servicemembers’ Civil Relief Act and sends a clear message to industry, according to SCRA experts. The decision affirms that service members “have the right not to have their vehicles sold at auction without a court order ... even if they did not notify the towing company of their military status in advance,” said Justice Department spokesman Alejandro Miyar.

For more, see Towing company improperly sold off troops’ cars, court rules.

(1) According to the story, Section 537 of the Servicemembers’ Civil Relief Act states that without a court order, a person holding a lien on the property or effects of a service member cannot foreclose or enforce any lien during any period of military service by the member and for 90 days afterward. The U.S. District Court, Eastern District of Virginia, reportedly ruled that Section 537 is a “strict liability” provision, meaning service members do not need to take any action to be protected. “Even if the defendants exercised utmost care in investigating their victims’ military status, they face liability for their actions,” wrote District Judge Robert Doumar in his Nov. 6 order, the story states.

Go here for free legal assistance for military servicemembers and their families.

Justice Dept. Settlement With BAC, Saxon To Yield $115K+ To Servicemembers Screwed Over By Allegedly Unlawful Foreclosures

From the U.S. Department of Justice (Washington, D.C.):

• The Justice Department announced [] that under its 2011 settlements with BAC Home Loans Servicing LP, a subsidiary of Bank of America Corporation, and Saxon Mortgage Servicing Inc., a subsidiary of Morgan Stanley, 316 service members whose homes were unlawfully foreclosed upon between 2006 and 2010 are due to receive over $39 million in monetary relief for alleged violations of the Servicemembers Civil Relief Act (SCRA).
  
  Under the first settlement, Bank of America is required to pay over $36.8 million to service members whose homes were unlawfully foreclosed upon between 2006 and 2010. Each service member will receive a minimum of $116,785, plus compensation for any equity lost with interest.
  
  Bank of America has already begun compensating 142 service members whose homes were illegally foreclosed on between 2006 and the middle of 2009. Under the same agreement, Bank of America agreed to provide information about its foreclosures from mid-2009 through the end of 2010. As a result of that review, Bank of America will now pay 155 service members upon whose homes it illegally foreclosed.
  
  Borrowers receiving payment under this settlement may receive an additional payment under a settlement between Bank of America and federal banking regulators -- the Office of the Comptroller of the Currency and the Board of Governors of the Federal Reserve System -- if the foreclosure occurred in 2009 or 2010. Payments provided under the federal banking regulators’ settlement will bring the total amount received by eligible borrowers to $125,000 plus equity where applicable.
  
  Under the second settlement, Saxon Mortgage Services Inc. is in the process of paying out over $2.5 million to 19 service members whose homes were unlawfully foreclosed upon between 2006 and 2010. Each service member will receive a minimum of $130,555.56, plus compensation for any equity lost with interest.

For the Justice Department press release, see Service Members to Receive $39 Million for Violations of the Servicemembers Civil Relief Act.

Victims In Alleged Metropolitan Money Store Foreclosure Rescue Scam Speak Out

(originally posted 6-14-08)
In Maryland, The Baltimore Sun features a story of two area homeowners who were victimized in the alleged Metropolitan Money Store equity stripping scam in which Federal prosecutors indicted eight suspects this week. The alleged scam resulted in over $35 million in fraudulently obtained mortgages and over $10 million in stolen home equity, say authorities.

• "They hurt a lot of people," said [homeowner Nadine] Bostic, who is a plaintiff in a class-action civil suit against some of the federal defendants. "I never thought I'd ever say I wanted someone to be in jail, but I do. They need to be put underneath the jail. Not on top, not inside - underneath." [...] "When I was told they [arrested the alleged perpetrators], I didn't know if I should jump for joy or what," she said. "It was a strange feeling. I never thought anyone was going to do anything."

***

• With her father serving in Iraq and money tight at home, [another victim, Jeanette] Meadows, 19, sounded less pleased about the arrests than weary of the whole affair yesterday as she described how her family became a target of the alleged mortgage schemers."They're backstabbers who can't be trusted," Meadows said from her home on Glenarm Road in Northeast Baltimore, a property that has avoided foreclosure only because a lawyer for the family last month asked a Circuit Court judge to invoke a federal law [the Servicemembers Civil Relief Act] that exempts active-duty military personnel from being forced from their homes.

For more, see Relief, anger follow arrests in mortgage loan scheme (Homeowners express emotions in alleged fraud that victimized them).

To read the Federal indictment of the alleged perpetrators, see U.S. v. JoyJackson, et al. (available online courtesy of the consumer protection attorneys at The Holland Law Firm, P.C. and the Legg Law Firm).

For more on the class action lawsuit filed against Metropolitam Money Store, go here to read the class action complaint; and for updates, check with the Metropolitan Money Store Class Action website.

Go here and go here for other posts on the alleged Metropolitan Money Store foreclosure rescue scam.

Go here for posts on the Servicemembers Civil Relief Act. joyjackson

Head Federal Number Crunchers: Regulators Fall Short In Oversight Of Compliance By Banksters w/ Law Protecting Servicemembers From Being Screwed Over

MortgageOrb reports:

• The Government Accountability Office (GAO) has issued a report warning that regulatory oversight of compliance relating to the Servicemembers Civil Relief Act (SCRA) has been "limited."
  
  "At least 15,000 instances of financial institutions failing to properly reduce servicemembers' mortgage interest rates and over 300 improper foreclosures have been identified by federal investigations and financial institutions in recent years," says the GAO.

***

• The GAO notes that although the U.S. Department of Justice has explicit SCRA enforcement authority, the department has only brought three cases against mortgage servicers for SCRA violations during the past five years.
  
  The GAO also observes that the U.S. Department of Veterans Affairs (VA), the Federal Housing Administration and the Federal Housing Finance Agency respectively obtain SCRA compliance data, but do not share this information among themselves or with the regulatory agencies.

For more, see GAO Slams Regulators For 'Limited' SCRA Compliance Oversight.

For the GAO report (94 pages), see Mortgage Foreclosures - Regulatory Oversight of Compliance with Servicemembers Civil Relief Act Has Been Limited (or go here for the easy-to-read report highlights).

Lenders Continue Dragging Out Lawsuit Despite Ruling That They Violated SCRA By Illegally Foreclosing On Active Duty Servicemember

The New York Times reports:

• While Sgt. James B. Hurley was away at war, he lost a heartbreaking battle at home. In violation of a law intended to protect active military personnel from creditors, agents of Deutsche Bank foreclosed on his small Michigan house, forcing Sergeant Hurley’s wife, Brandie, and her two young children to move out and find shelter elsewhere.

***

• Since then, Sergeant Hurley has been on an odyssey through the legal system, with little hope of a happy ending — indeed, the foreclosure that cost him his home may also cost him his marriage. “Brandie took this very badly,” said Sergeant Hurley, 45, a plainspoken man who was disabled in Iraq and is now unemployed. “We’re trying to piece it together.”

• In March 2009, a federal judge ruled that the bank’s foreclosure in 2004 violated federal law but the battle did not end there for Sergeant Hurley.

• Typically, banks respond quickly to public reports of errors affecting military families. But today, more than six years after the illegal foreclosure, Deutsche Bank Trust Company and its primary co-defendant, a Morgan Stanley subsidiary called Saxon Mortgage Services, are still in court disputing whether Sergeant Hurley is owed significant damages. Exhibits show that at least 100 other military mortgages are being serviced for Deutsche Bank, but it is not clear whether other service members have been affected by the policy that resulted in the Hurley foreclosure.

***

• In court papers, lawyers for Saxon and the bank assert the sergeant is entitled to recover no more than the fair market value of his lost home. His lawyers argue that the defendants should pay much more than that — including an award of punitive damages to deter big lenders from future violations of the law. The law is called the Servicemembers Civil Relief Act, and it protects service members on active duty from many of the legal consequences of their forced absence.

• Even though some of the nation’s military families have been sending their breadwinners into war zones for almost a decade, some of the nation’s biggest lenders are still fumbling one the basic elements of this law — its foreclosure protections.

• Under the law, only a judge can authorize a foreclosure on a protected service member’s home, even in states where court orders are not required for civilian foreclosures, and the judge can act only after a hearing where the military homeowner is represented. The law also caps a protected service member’s mortgage rate at 6 percent.

For more, see A Reservist in a New War, Against Foreclosure.

For original lawsuit filed in Detroit Federal Court, see Hurley vs. Deutsche Bank National Trust, et al.

Go here for more on the rights under the Servicemembers Civil Relief Act.

Bankster Agrees To Pay $12M To Settle DOJ Allegations It Ripped Off & Otherwise Trampled On Active Duty Servicemembers' Rights Under SCRA

From the U.S. Department of Justice (Washington, D.C.):

• Capital One N.A. and Capital One Bank (USA) N.A. (together Capital One), have agreed to pay approximately $12 million to resolve a lawsuit by the Department of Justice alleging the companies violated the Servicemembers Civil Relief Act (SCRA), the Justice Department announced [].
  
  The settlement covers a range of conduct that violated the protections guaranteed service members by the SCRA, including wrongful foreclosures, improper repossessions of motor vehicles, wrongful court judgments, improper denials of the 6 percent interest rate the SCRA guarantees to service members on some credit card and car loans and insufficient 6 percent benefits granted on credit cards, car loans and other types of accounts.
  
  The proposed consent order, which was filed simultaneously with the complaint, is one of the most comprehensive SCRA settlements ever obtained by a government agency or any private party under the SCRA.

For the Justice Department press release, see Justice Department Reaches $12 Million Settlement to Resolve Violations of the Servicemembers Civil Relief Act by Capital One.

Active Duty Guardsman Sues Lender Over Allegedly Illegal Foreclosure; Loses Home While In Iraq Despite Legal Protection Under SCRA

In Michigan, National Public Radio reports:

• [Army National Guard Sgt. James] Hurley and his family had been living in a three-bedroom manufactured home on Michigan's Paw Paw River. But they fell behind on the mortgage, and their lender began foreclosure proceedings in 2004. While Hurley was in Iraq serving as an Army mechanic, the lender sold the house and evicted Hurley's wife and children. Hurley says he learned about it after the fact during one of his occasional phone conversations with his wife.

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• Now, the Hurleys are suing several parties involved with the foreclosure — including Deutsche Bank and Saxon Mortgage. The family says it should have been protected from foreclosure by a long-standing federal law known as the Servicemembers Civil Relief Act — what lawyers call the SCRA.

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• "Military people need to have certain protections when they're off trying to serve us in a war," said Matt Cooper, the Hurleys' lawyer. "One of the rights under the SCRA is that you can't foreclose on them." [...] "It looks to me like the bank screwed up badly and needs to make things right," federal judge Nancy Edmunds said during a February hearing.

For more, see Lenders, Service Members Clash Over Law.

For copy of the original civil lawsuit filed in Detroit Federal Court, see Complaint - Hurley vs. Deutsche Bank National Trust, et al.

Go here for other posts on the Servicemembers Civil Relief Act.

Active Duty Servicemembers Also Forced To Fight Sloppy Lenders & Landlords In Foreclosure, Eviction, Auto Repo Actions In Violation Of Federal Law

In Greenacres, Florida, the The Palm Beach Post reports:

• It is one thing to worry about the safety of your spouse who is serving in Iraq or Afghanistan. It is another thing to be afraid that, while he or she is gone, the bank will take away your house and your loved one will have nowhere to come home to. Linda Kellam, 50, knows both those fears. Her husband, James, 49, is serving in Afghanistan with the 1218 Transportation Unit of the Army National Guard, which is based in West Palm Beach. By the time he was deployed July 8, they had both lost their jobs in layoffs and then the bank tried to foreclose on their Greenacres condo.

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• Elaine Martens, a Palm Beach Legal Aid Society attorney, works with the Armed Services Advocacy Project and with [non-profit] agencies [...]. Using the terms of the Servicemembers’ Civil Relief Act of 2004 Martens can, in many cases, fight foreclosures and evictions due to failure to pay rent, head off the repossession of vehicles or other goods bought in installments, and limit how much interest credit card issuers charge military families even on balances accrued before active service began.

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• Martens currently is fighting a local bank that foreclosed on a man while he was home after serving in Iraq and who is back in Iraq now. "One of the forms the bank has to file is an affidavit saying whether the owner is in the military," Martens said. "The affidavit the bank filed said this person wasn't in the military, but when he bought the house the proof of income he showed was a check stub from the military. Their claim that they didn't know his status is pretty far-fetched."

For the story, see Nonprofits work to spare deployed soldiers and their families from foreclosure.

Go here for other posts on the Servicemembers’ Civil Relief Act.

Servicemember Files Federal Suit Against Landlord; Alleges Illegal Eviction Despite Giving Notice Of Activation For Military Duty

In Hammond, Indiana, Chicago Sun-Times Media Wire reports:

• A northwest Indiana service member is suing an apartment complex for evicting her after she told them she was being activated for duty, according to a lawsuit filed in the U.S. District Court in Hammond. Ciearra Pulliam of Griffith claims in the suit that she received notice on Oct. 23 that she would be sent to Wisconsin from Oct. 26 to Nov. 18. According to the suit, Pulliam notified the Mansards Apartments and was told to give them a copy of her activation papers, which she did. She was having problems paying her rent, though, because of a discrepancy in her military pay, according to a police report filed with the suit.

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• Pulliam's belongings ended up being evicted Nov. 10 and were left outside. She is suing for $10,800, which Pulliam claims is the damage done to her property, or triple that amount for emotional distress.

For the story, see Soldier Suing After Being Evicted From Apartment.

The Federal law known as the Servicemembers’ Civil Relief Act grants troops on active duty various legal protections, including a shield against foreclosure in some cases. The protections in this law are available to troops from all over the country.

Go here for free legal assistance for military servicemembers and their families, and go here for other posts on the Servicemembers Civil Relief Act.